As I informed you last week, Representative Vicki Lopez, Senator Jennifer Bradley and Senator Jason Pizzo have filed companion bills HB1021 and SB1178 in The Florida House of Representatives and The Florida Senate that take aim at community association managers and community association management companies.
About 30 years ago I represented a condominium that had its roof blown off after Hurricane Andrew. They needed a new roof. Their management company recommended a roofing company that they owned. There was no disclosure of this conflict of interest. When the roofing contract was breached, I sued the management company on a bunch of different theories including the failure to disclose the conflict. To this day, I remember the phone call from their attorney. It went something like this: “Eric if it was your intention to wake us up and make it clear that we should be disclosing this conflict of interest to our clients — you’re right. We should.”
Well………..although some laws were passed since then that require disclosure, there are still conflicts of interest not being disclosed. So, here is what HB1021 and SB1178 are proposing:
468.4335 Conflicts of interest.—
(1) A community association manager or a community association management firm, including directors, officers, persons with a financial interest in a community association management firm, and the relatives of such persons, must disclose to the board any activity that may reasonably be construed to be a conflict of interest. A rebuttable presumption of a conflict of interest exists if any of the following occurs without prior notice, as required in subsection (5):
(a) A community association manager or a community association management firm, including directors, officers, persons with a financial interest in a community association management firm, or the relative of such persons, enters into a contract for goods or services with the association.
(b) A community association manager or a community association management firm, including directors, officers, persons with a financial interest in a community association management firm, or the relative of such persons, holds an interest in a corporation, limited liability corporation, partnership, limited liability partnership, or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.
(2) If the association receives and considers a bid to provide a good or service, other than community association management services, from a community association manager or a community association management firm, including directors, officers, persons with a financial interest in a community association management firm, or a relative of such persons, the association must also consider at least three bids from other third-party providers of such good or service.
(3) If a community association manager or a community association management firm, including directors, officers, persons with a financial interest in a community association management firm, or the relative of such persons, proposes to engage in an activity that is a conflict of interest as described in subsection (1), the proposed activity must be listed on, and all contracts and transactional documents related to the proposed activity must be attached to, the meeting agenda. The disclosures must be entered into the written minutes of the meeting. Approval of the contract or other transaction requires an affirmative vote of two-thirds of all other directors present. At the next regular or special meeting of the members, the existence of the contract or other transaction must be disclosed to the members. Upon motion of any member, the contract or transaction must be brought up for a vote and may be canceled by a majority vote of the members present. If the contract is canceled, the association is liable only for the reasonable value of the goods and services provided up to the time of cancellation and is not liable for any termination fee, liquidated damages, or other form of penalty for such cancellation.
(4) If the board finds that a community association manager or a community association management firm, including directors, officers, persons with a financial interest in a community association management firm, or the relative of such persons, has violated this section, the association may cancel its community association management contract with the community association manager or the community association management firm. If the contract is canceled, the association is liable only for the reasonable value of the management services provided up to the time of cancellation and is not liable for any termination fee, liquidated damages, or other form of penalty for such cancellation.
(5) If an association enters into a contract with a community association manager or a community association management firm, including directors, officers, persons with a financial interest in a community association management firm, or the relative of such persons, which is a party to or has an interest in an activity that is a possible conflict of interest as described in subsection (1) and that activity has not been properly disclosed as a conflict of interest or potential conflict of interest as required by this section, the contract is voidable and terminates upon the association filing a written notice terminating the contract with its board of directors which contains the consent of at least 20 percent of the voting interests of the association.
(6) As used in this section, the term “relative” means a relative within the third degree of consanguinity by blood or marriage.
Section 3. Paragraph (b) of subsection (2) of section 468.436, Florida Statutes, is amended to read: 468.436 Disciplinary proceedings.
(2) The following acts constitute grounds for which the disciplinary actions in subsection (4) may be taken:
(b)1. Violation of any provision of this part.
- Violation of any lawful order or rule rendered or adopted by the department or the council.
- Being convicted of or pleading nolo contendere to a felony in any court in the United States.
- Obtaining a license or certification or any other order, ruling, or authorization by means of fraud, misrepresentation, or concealment of material facts.
- Committing acts of gross misconduct or gross negligence in connection with the profession.
- Contracting, on behalf of an association, with any entity in which the licensee has a financial interest that is not disclosed.
- Failing to disclose any conflict of interest as required by s. 468.4335.
- Violating any provision of chapter 718, chapter 719, or chapter 720 during the course of performing community association management services pursuant to a contract with a community association as defined in s. 468.431(1).
Tune in Sunday February 11th at 11am for an all new episode of Condo Craze and HOAs where we will go into all this and answer your questions!
